Thomas Cook fails in $50 mln Islamic bond bid

By Frederik Richter Available at: http://business.maktoob.com/20090000488854/Thomas_Cook_fails_in_$50_mln_Islamic_bond_bid/Article.htm

MANAMA – Travel firm Thomas Cook has failed to place a $50 million aircraft finance Islamic bond with Gulf region investors, three bankers said, marking the failure of what would have been the first European corporate sukuk. Three bankers said the five-year sukuk, called the Golden Age sukuk, was marketed to Saudi investors by lead arranger Wasatah Capital, a Saudi investment company, but was called off last month after it failed to gain interest in the kingdom partly because the yield offered of 7 percent was seen as too low.

The private placement was also unrated and seen as too illiquid to be attractive to Islamic banks’ treasuries in the kingdom and elsewhere in the Gulf where it was marketed after it fell through in Saudi Arabia.

“There was limited access, it was a small issue and they didn’t pay enough,” said a Bahrain-based banker familiar with the planned sale who did not wish to be named. While small in size, a successful placement of the issue could have attracted more European corporates to tap funds in the world’s top oil exporting region through Islamic finance, bankers said. “They were going to great length outside Saudi Arabia to find a solution. They looked everywhere, really,” the banker said.

Bankers said the issue was also hit by a freeze of emerging bond markets triggered by the European debt crisis in May, with other bond issues in the Gulf Arab region being postponed as well. An official at Wasatah declined to comment, citing regulations by Saudi Arabia’s Capital Markets Authority (CMA). Wasatah, partially owned by Malaysian investment bank Kenanga, is an investment company licensed by CMA.

INVESTMENT RESTRICTIONS

The market for sukuk is expected to reach more than $26 billion in new issuance this year. Sukuk are structured around underlying assets that generate the cash-flows needed to pay investors. The Golden Age sukuk was structured as an ijara sukuk, a leasing structure. Its purpose was to finance two aircrafts used by Condor, a German unit of Thomas Cook, according to an offering circular. A spokesman for Condor, to which Thomas Cook referred Reuters queries, could not immediately comment.

Best Regards
ZULKIFLI HASAN
DURHAM, UK

Kyoto, Japan